Starting a Day Care Costs $130,000 to $490,000

Are you looking to open your own day care facility? As part of your business plan, make sure to consider all the startup and operating costs to open and run a day care business.

How much does it cost to start a day care business? And how much does it cost to run a day care business on average? Is this profitable?

We’ve identified that it costs anywhere between $130,000 to $490,000 to start a day care business with 50 children, plus $75,500 – $100,000 in operating costs per month to run the business.

Want to know more? In this article we’ll go through all the different costs you will need to budget for before you can open your own day care business. Read on!

Day Care Startup Costs

The startup costs for opening a child care center depend on various factors such as the location and size of your day care facilities, the capacity (the number of children you plan to have), the quality of the amenities, etc. 

So to give you a clear example, in this article we present you cost estimates to open a day care center for 50 children.

There are 2 types of costs: startup costs and operating costs. Let’s first start below with startup costs.

Note that these costs are for illustrative purposes and depend on several factors which might not fully apply to you.

Startup cost	Amount
Lease deposit	$22,500 – $45,000
Renovation	$90,000 – $420,000
Equipment & supplies	$15,000 – $20,000
Licenses	$2,500 – $5,000
Total	$130,000 – $490,000

Day care lease deposit cost

If you decide to rent a space to install your child care center, you need to decide to stay there for some years and pay a refundable security deposit. The cost will vary depending on factors like the location and size of your child care center and the scale of your operation.

In average, you would have to spend anywhere between $0.60 – $2.50 per square foot to lease a commercial space for your child care center. 

When it comes to space, you should have on average 100 square feet per children for the space reserved to kids (indoor and outside playground, sleeping and dining room). So assuming you have 50 children, you should have a space of 5,000 square feet. Note that this is an average and depend on the number and quality of the amenities and services you offer.

In addition to the kids area, you should add another 30-40% for the operations (the kitchen, the offices, storage room, the reception, etc.).

Therefore, a day care accommodating 30 children would need around 7,000 square feet. Assuming you pay $1.50 / sq. ft. in rent, you will have to set aside at least $22,500 for the refundable 3-month lease deposit.

What if you decide to buy an existing building?

If you decide to buy an existing building instead of leasing, you will likely need a mortgage. Assuming you pay for a 7,000 sq. ft. building at $500 per square foot, you would pay for $3,500,000.

You would have to pay for 10-20% as a loan downpayment so $350,000 to $700,000.

Day care renovation costs

Now that you have signed the lease and paid the lease deposit, you will have to remodel and renovate the space to meet day care regulation rules and accommodate children. While renovating your space, ensure it’s accessible, sustainable, functional and safe. 

Assuming that your leased child care space is already in good condition, renovations for a day care cost around $40 – $60 per square foot, whilst building a facility from the ground up will cost $170 / sq. ft.

Therefore, assuming you’re renovation an empty space, the total renovation costs for a 7,000 square foot day care facility can go up to $280,000 – $420,000. Of course, the costs will be much lower if the layout of the building can conveniently fit all the different areas and rooms for the day care facility.

Now, assuming there is minimum renovation required, here are a few examples of standard renovation costs you can expect for a facility accommodating 50 children: 

• Kitchen furniture and equipment ($20,000 – $30,000)
• Bathroom ($10,000 – $20,000)
• Heating & air conditioning unit ($20,000)
• Appliances ($3,000 – $7,000)
• Architectural fee (10 – 15% of total project value, $10,000)
• Contractual fee (30 – 40% of total project value, $20,000 – $25,000)

So here, you would be paying only $90,000 – $115,000 for renovation costs.

Day care supplies & equipment costs

Besides renovation costs, you also need to buy some essential equipment to start your child care center. Some basic equipment you need for your child care center are: baby cots, bed sheets, mattresses, pillows, pillowcases, toys, tables, chairs, projectors, TVs, DVD players, fire alarms, and security alarms. 

The cost of these pieces of equipment and supplies will fall anywhere between $300 – $400 for each child. Assuming you’re planning to start with 50 children in your child care, the cost of startup inventory will be $15,000 – $20,000.

Day care license & permits 

You’ll need some essential paperwork and fees to operate your child care center legally. You also need the following licenses & permits to run your childcare business:

• Business Operation License
• Family Child Care License
• Food Handler’s Permit
• Health and Safety Permit
• Certificate of Occupancy
• Building Permit

A small business license will cost you around $100. However, the price again depends on the state of operation of your child care center. 

The Family Child Care License is issued by the Department of Early Education and Care. The estimated cost of the license will be around $100.

The Food Handler’s Permit usually is issued by the Department of Health in every state. Its requirements, courses, and fees vary from state to state. The Food Handler’s Permit costs range between $10 to $600. 

You also need to get the Health & Safety Permit which ensures that your child care follows the government’s health and safety stipulations.

The cost of a certificate of occupancy depends on the size of the child care facility, square footage, type of construction, and other factors. It also varies from one state to another, but the estimated cost will be $250. 

The Building Permit is issued by the state and local governments. The cost of the permit is $500 to $2,000, which varies depending on other factors like the size of your child care facility and its location.

The total cost of licenses is therefore limited, depending on the state you should spend on average $2,500 to $5,000 total.

Day Care Operating Costs

Apart from the one-time startup costs you need to pay before opening your day care center, you should also budget the recurring or operational costs you’ll pay monthly to run your business. 

The operating costs will vary slightly depending on the size of your child care center and the amenities (indoor and outdoor playground, sleeping area, etc.). Here’s a brief overview of the operating costs for a 7,000 sq. ft. child care facility with 50 children.

Operating Cost	Amount (per month)
Rent & utility bills	$9,000
Caregivers salaries	$35,000 – $40,000
Management & admin salaries	$7,500 – $10,000
Supplies (food, beverage, etc.)	$20,000 – $33,000
Other (bookkeeping, security, housekeeping, etc.)	$4,000 – $8,000
Total	$75,500 – $100,000

Rent & Utility Bills 

If you’re leasing your child care center, you’ll have to pay a monthly rent which will vary according to the size and location of the real estate.

Using the above example, you’ll have to pay for $7,500 in rent each month for a 7,000 sq. ft. facility. 

Besides the rent, you also have to pay utility bills (gas, water, electricity, phone). These utilities would cost around 25-30% of your rent, so an additional $2,000.

Day care caregivers staff costs

Staff costs are the largest expense for a child care center. To provide the highest quality of care and life to the children, you need to hire an adequate number of efficient staff who care for your residents regularly without failing or negligence. 

The average annual gross salary for Day Care caregivers is $30,520 in 2022. Day care teachers instead were paid an average annual salary of $52,000.

Assuming you keep a ratio of children / caregivers or 5:1, you will need to hire 10 employees. This translates to about $35,000 – $40,000 in salary costs each month (including 20% for taxes and benefits).

Day care management staff costs

In addition to the caregivers, you will need to hire a manager as well as a support team for operations (human resources, finance, etc.). Of course, the number of management & administrative roles depend on the size of the day care facility and the children you have.

For a 50 children facility, you should be fine with 1 manager and 1 assistant manager.

Day care managers earned on average $45,000 per year. So you should set aside $7,500 to $10,000 for management roles salaries.

Of course, you can also hire 1 cleaning operators if you take care of housekeeping in-house and don’t outsource these functions to a 3rd party company.

Day care supplies costs

Supplies are one of the most important expenses for a child care center. There are 2 types of supplies: food & beverage and essential supplies.

a) Food & beverage supplies

You must provide fresh, nutritious, delicious, and healthy food to the children. On average you should spend $350 to $600 per children per month.

So assuming that your facility has 50 children, you should expect to spend around $17,500 $30,000 on monthly food & beverage supplies. 

b) Essential Supplies 

Besides the big equipment costs which you’ll pay while starting your child care center, you’ll also need to budget for the continual supplies every month. 

On average, essential supplies cost $60 per child, therefore you should keep aside $3,000 per month here.